9 Profitable Stocks with High Environmental Rankings

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Environmental rankings may matter more to investors, since it's even less likely we didn't cause climate change.

On Friday, the UN’s Intergovernmental Panel on Climate Change (IPCC) issued a report stating that it is extremely likely – at least 95% probable – that human behavior has been the primary contributing factor to global warming since the mid-twentieth century.

The Climate Change 2013: the Physical Science Basis found that severe changes in the climate have occurred since 1950, noting that “the last three decades have been successively warmer at the Earth’s surface than any preceding decade since 1850.”

The IPCC’s latest report is the first of four that will make up the scientific body’s latest assessment report on climate change, which will be released at the end of October 2014. The to-be-issued report will be the IPCC’s fifth assessment in 24 years, and with each report, the IPCC has increased the likelihood that human activities are the driving force behind recent global warming:

1990 – “the observed increase could be largely due to this natural variability, alternatively this variability and other human factors could have offset a still larger human-induced greenhouse warming.”

2001 – "there is new and stronger evidence that most of the warming observed over the last 50 years is attributable to human activities.”

2007 – “most of the observed increase in global average temperatures since the mid-20th century is very likely due to the observed increase in anthropogenic greenhouse gas concentrations.”

Investing ideas

Given the IPCC’s findings on the human impact on climate change, we decided to take a look at companies that have embraced environmentally friendly or sustainable practices as part of their operations. We specifically chose to focus on companies with encouraging accounting information to show that going “green” doesn’t have to hurt the bottom line.

To begin, we created a universe of stocks that ranked in the 70th percentile or higher in Environment rankings on CSRHub. We then screened that list for stocks as indicated by rising gross profit margins year-over-year for the last three years. Gross margin is the percentage of profit a company makes for each dollar it generates in sales, after deducting production expenses. Examples of these expenses include operating costs, payroll, and taxes.

Gross Margin = Gross Profit / Revenue

The higher the percentage, the greater the gross profits a company takes from its revenue. When a company has rising gross margins, it indicates that the firm is in control of its costs.

We were left with nine stocks with high environment rankings on our list.

Click on the interactive chart below to see sales data over time.

Do you think these stocks will continue to increase their gross margins? Use this list as a starting point for your own analysis.

And for the final time interval, gross margins increased from 35.66% to 36.5% (12 months ending 2012-12-31 vs. 12 months ending 2011-12-31).

Environmental rating: 76.

2. Digi International Inc. (DGII, Earnings, Analysts, Financials): Operates as a device networking company that develops products and technologies to connect and manage local or remote electronic devices over a network, via the Internet or via satellite. Market cap at $258.23M, most recent closing price at $9.99.

And for the final time interval, gross margins increased from 52.21% to 52.66% (12 months ending 2012-09-30 vs. 12 months ending 2011-09-30).

Environmental rating: 71.

3. American Public Education, Inc. (APEI, Earnings, Analysts, Financials): Provides online higher education focused primarily on serving the military and public service communities. Market cap at $667.02M, most recent closing price at $37.80.

And for the final time interval, gross margins increased from 47.04% to 57.55% (12 months ending 2012-12-31 vs. 12 months ending 2011-12-31).

Environmental rating: 73.

5. Littelfuse Inc. (LFUS, Earnings, Analysts, Financials): Designs, manufactures, and sells circuit protection devices for use in the automotive, electronic, and electrical markets in the Americas, Europe, and the Asia-Pacific. Market cap at $1.74B, most recent closing price at $78.22.

And for the final time interval, gross margins increased from 38.6% to 38.7% (12 months ending 2012-12-29 vs. 12 months ending 2011-12-31).

Environmental rating: 75.

6. Pier 1 Imports, Inc. (PIR, Earnings, Analysts, Financials): Operates as an importer and specialty retailer of imported decorative home furnishings and gifts in the United States, Canada, and Mexico. Market cap at $2.06B, most recent closing price at $19.52.

And for the final time interval, gross margins increased from 42.46% to 43.58% (12 months ending 2013-03-02 vs. 12 months ending 2012-02-25).

Environmental rating: 86.

7. Booz Allen Hamilton, Inc. (BAH, Earnings, Analysts, Financials): Provides professional services primarily to US government agencies in the defense, security, and civil sectors, as well as to corporations, institutions, and not-for-profit organizations. Market cap at $2.67B, most recent closing price at $19.32.

Kapitall Wire offers free cutting edge investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by Kapitall Inc., and its affiliate companies.

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